8) profit - normal and supernormal Flashcards
1
Q
What’s the equation for profit?
A
TR-TC
2
Q
What are included in the total cost?
A
The explicit costs which are physical (TFC + TVC)
The implicit costs which is the opportunity costs
3
Q
When do we have normal profit?
A
0 economic profit
4
Q
When do we have a supernormal profit?
A
When we have economic profit above 0
5
Q
When do we have subnormal profit?
A
When we’re making a loss and the economic profit is below 0
6
Q
What is the definition of normal profit?
A
The minimum level of profit required to keep factors of production in their current use
7
Q
When do we have normal profit?
A
AR=AC
8
Q
When do we have supernormal profit?
A
AR>AC
9
Q
When do we have subnormal profit/loss?
A
AR<AC
